This work provides an insight into the supply chain of H&M. After a brief company introduction the whole structure of H&M´s Supply Chain is analyzed in detail. Starting from Bills of Material (BOM) and Bills of Routing (BOR) a Business Scope Diagram is created. This is followed by a detailed Geographic Map where the flows of goods and flows of information are displayed and explained. For better readability in this part an example for the situation in Europe is leveraged. Going further, a comprehensive thread diagram is the result. In this step we can identify problems in the current Supply Chain. Two well-known instruments, namely Balance Score Card (BSC) and Current Reality Tree (CRT) are used for the analysis of the problems. With help of the Future Reality Tree (FRT) we can give recommendations for the future and how current problems of the Supply Chain can be solved.
Table of Contents
1. Introduction
1.1 Company Introduction
1.2 SWOT Analysis
2. Structure of Supply Chain
2.1 BOM – Bill of Materials
2.2 BOR – Bill of Routing
2.3 Customer and Supplier Table
2.4 Business Scope Diagram
2.5 Geographic Map
2.6 Thread Diagram
2.7 Problem Definition
3. Supply Chain Analysis
3.1 KPI Decomposition Table
3.2 Aligning Metrics with Balanced SCORcard (BSC)
3.3 SCORcard with Gap Analysis
3.4 Metrics Decomposition
3.5 Current Reality Tree with Causal Analysis
4. Improvement and Conclusions
4.1 Future Reality Tree with Causal Analysis
4.2 Further Improvement Actions
Objectives and Topics
This report aims to analyze the operational efficiency and supply chain structure of H&M, identifying key performance bottlenecks and proposing strategic improvements. The research focuses on the challenges of balancing cost, speed, and product variability in the fast fashion industry.
- Analysis of H&M's global supply chain structure and bill of materials/routing.
- Evaluation of key performance indicators (KPIs) using the SCOR reference model.
- Identification of root causes for high inventory levels and forecasting errors.
- Development of a future reality tree to optimize supply chain processes.
- Strategic recommendations including ABC classification and improved distribution center management.
Excerpt from the Book
3.5 Current Reality Tree with Causal Analysis
We built a current reality tree with the causal analysis to identify the supply chain problems. The root causes for high inventory are poor forecasting demand for market needs, the external competitors - fierce competition among all the apparel fast fashion industry and finally yet importantly, unit cost is so low lead to over-consume. Firstly, the wrong forecasting demand in apparel market is a crucial mistake, mainly because it will in turn directly contribute to high recycle days of supply in inventory control. Further, external competitors and the economic scale of fast fashion industry has been the most fiercely competitive ecosystem recently, and most importantly, consumers have large bargaining power in price and categories of items etc. This will influence inventory days of supply. Moreover, unit cost is also a reason to produce large batches. The bigger the order, the smaller the price per item. For fast fashion, it is often imperative. The industry typically places high-volume orders well in advance, but supply too often exceeds actual demand. The consequence is low inventory turnover rate.
In addition, there are so many new items, by definition, that have no sales history. Companies have to base their forecast on the sales history of similar items. However, two different fashion items are ever exactly alike, therefore you have to interpolate and approximate, which may affect the forecasting accuracy. Besides, fashion merchandise has short life cycles. Companies can rarely accumulate enough sales history to generate a statistically accurate forecast before the item’s season has ended. Because life cycles are short, companies have little opportunity to correct for error. If lead times are longer than the lifetime of an item, you have no opportunity to re-order from your supplier. Moreover, if the season of an item is shorter than a few weeks, you may not be able to re-allocate, and it may affect the forecasting accuracy significantly.
Chapter Summary
1. Introduction: Provides an overview of the H&M brand and performs a SWOT analysis to identify its internal strengths, weaknesses, and external market position.
2. Structure of Supply Chain: Details the operational flow of goods from material sourcing and manufacturing to global distribution, including a comprehensive geographic analysis.
3. Supply Chain Analysis: Applies the SCOR model to identify performance gaps, specifically focusing on inventory turnover, forecasting accuracy, and cash-to-cash cycle times.
4. Improvement and Conclusions: Proposes actionable strategies to mitigate identified supply chain issues, such as implementing ABC classification and refining forecasting methods.
Keywords
Supply Chain Management, H&M, SCOR Model, Fast Fashion, Forecasting Accuracy, Inventory Management, Logistics, KPI, Efficiency, Lead Time, Sustainability, Distribution Network, Vertical Integration, Retail Operations, SWOT Analysis
Frequently Asked Questions
What is the core focus of this report?
The report provides a deep-dive analysis of H&M's supply chain operations, examining how the company manages the trade-off between efficiency, speed, and product variability in the fast fashion sector.
What are the central themes of the analysis?
The study revolves around the challenges of inventory management, supply chain reliability, forecasting errors, and the optimization of distribution center networks within a global, outsourced manufacturing environment.
What is the primary research objective?
The primary goal is to identify why H&M faces high inventory levels and forecasting inaccuracies and to derive a future-oriented model that improves supply chain performance and cost-effectiveness.
Which methodology is employed in this study?
The author uses the SCOR (Supply Chain Operations Reference) model, KPI decomposition tables, and Current/Future Reality Trees to map out existing process failures and propose systemic improvements.
What topics are covered in the main section of the paper?
The main part covers the structural layout of H&M's supply chain (BOM/BOR), a mapping of global production and distribution, an analytical evaluation using the Balanced Scorecard, and specific recommendations for improvement.
Which keywords best characterize the work?
Key terms include Supply Chain Management, SCOR Model, Fast Fashion, Inventory Management, Forecasting Accuracy, and Logistics Optimization.
How does H&M balance the challenges of the fast fashion industry?
The report highlights that H&M prioritizes efficiency and variability, often at the cost of high inventory levels, whereas competitors like Zara focus heavily on speed.
What is the role of the Current Reality Tree in the analysis?
It serves as a diagnostic tool to visually link root causes, such as poor forecasting and short product lifecycles, to the specific supply chain problems like low inventory turnover.
What specific suggestion is made for low-demand products?
The author recommends implementing an ABC classification system to centralize the handling of "C-products" (low demand) in order to reduce operational costs and improve logistics efficiency.
- Citar trabajo
- Michael Rögele (Autor), 2019, Supply Chain Analysis of H&M, Múnich, GRIN Verlag, https://www.grin.com/document/497203
